DMC/SandT/07/10T. Comedy (U.K.) Limited v. E M T Limited
English High Court: Queen’s Bench Division: Commercial Court: Jonathan Hirst
QC sitting as a Deputy Judge: 28 March 2007
Cameron Maxwell Lewis, instructed by Hugh-Jones & Co, for T. Comedy
Dominic Happé, instructed by Clyde & Co, for the Respondent EMT
CARRIAGE OF GOODS BY ROAD: CMR CONVENTION: ROAD HAULAGE ASSOCIATION CONDITIONS
OF CARRIAGE AND OF STORAGE: INCORPORATION OF RHA CONDITIONS IN CARRIAGE
CONTRACT: LIEN PROVISIONS: GENERAL AND PARTICULAR LIENS: OWNERSHIP OF THE GOODS
LIENED: WHETHER GENERAL LIEN COMPATIBLE WITH ART.13.2 OF CMR: WHETHER ART.13.2
LIEN OPERATES WHERE CARRIAGE CHARGES NOT SHOWN ON CONSIGNMENT NOTE
Summary
On the facts of this case, the court held that the lien provisions of certain
Road Haulage Association conditions were not included in the relevant contract
of carriage and, if they had been, no general lien would have been applicable,
since the Customers of the carrier, against whom the lien was being exercised,
were not the owners of the goods consigned. But, the court held obiter,
even if the contract of carriage had incorporated the relevant RHA Conditions,
no right of general lien could have been effective since – in the context of
carriage under the CMR Convention - it would have amounted to a derogation from
the right of the consignee to obtain delivery under the Convention, on payment
of the outstanding charges relating to that consignment only. Article 41 of the
Convention applied. Further, in the case in question, the carrier had no right
of particular lien under Article 13.2, since the charges in question had not
been entered on the consignment note, as required by Article 6(1)(i).

DMC Category Rating: Developed

Facts
The Claimant ("TCL") designed and supplied ladies garments and
accessories to a number of top fashion retailers. It did not manufacture the
garments itself but sub-contracted the work to a number of countries,
particularly Turkey, where the labour costs were low. One subcontractor that it
used was Whisper London Limited, which had close links to a Turkish factory
called Bates Istanbul. The Respondent ("EMT") was a haulier, with a
depot and warehouse at Beckton, in the east of London.

Whisper and Bates had long-standing arrangements with the
Respondent to transport material and accessories for the garments from London to
Turkey and the finished garments back from Turkey to London. These arrangements
related to a number of customers, including the Claimant. These arrangements
were formalized in a tripartite contract between Whisper, Bates and EMT, dated 8
September 2005.

EMT’s delivery notes and invoices all referred on their
reverse to the fact that "all goods are carried under RHA [Road Haulage
Association] Conditions of Carriage 1988 and stored under RHA Conditions of
Storage 1998, copies of which are available on application to EMT."

Clause 14 of the RHA Conditions of Carriage provides as follows:
"(1) The Carrier shall have a general lien against the Customer, where the
Customer is the owner of the Consignment, for any monies whatever due from the
Customer to the Carrier. If such lien is not satisfied within a reasonable time,
the Carrier may, at its absolute discretion, sell the consignment or part
thereof, as agent for the Customer and apply the proceeds towards the monies due
and the expenses of the retention, insurance and sale of the Consignment…
(2) Where the Customer is not the owner of the Consignment, the Carrier shall
have a particular lien against the said owner, allowing the Carrier to retain
possession, but not to dispose of, the Consignment against monies due from the
Customer in respect of the consignment."

Clause 14 of the RHA Conditions of Storage is in identical
terms, save that the warehouseman is called the Contractor.

Given that the carriage from Turkey to the UK was international
carriage by road, it was subject to the CMR Convention, to which both Turkey and
the UK are signatories. For each consignment carried, EMT issued a consignment
note, as required by CMR. For goods carried from Turkey to London, the
consignment note named Bates as the sender and Whisper as the consignee. Whisper
had an office in the EMT warehouse and was also entitled to the free storage of
imported garments for up to one week, pending delivery to the retailer. The
boxes in the consignment notes for entry of the carriage charges were left
blank.

By the summer of 2006, Bares and Whisper were in severe
financial difficulty. EMT was owed in the region of £90,000.00 by Bates and
£5,000.00 by Whisper. On 3 August 2006, two trucks carrying TCL garments
arrived at EMT’s warehouse at Beckton, the intention being that the garments
would be dispatched from the warehouse the following day to the relevant
retailer’s distribution centre in Yorkshire. The following day, certain other
garments – also part of a TCL order – arrived at Beckton by airfreight and
were stored there for the account of Whisper, pending onward forwarding to the
retailer. That did not occur, as EMT exercised a lien on the garments, those
carried by road and those by air, for all outstanding charges due from Bates and
Whisper, amounting to some £92,800.00. On 4 August, TCL was notified of the
exercise of the lien. It protested and argued that EMT only had the right to
exercise a lien for the carriage charges relating to the particular road
consignments.

On 16 August, on the application of TCL, a High Court judge
ordered that the garments be released against an undertaking by TCL to pay
compensation to EMT - if any were later found to be due – backed by a cash
deposit of £25,000.00.

The Issues
Counsel for TCL argued that the RHA Conditions of Carriage were not
incorporated into the agreement between EMT, Bates and Whisper. Even if they
were, EMT had, at best, a particular lien for the carriage charges on the two
consignments in-bound from Turkey, which TCL had already offered to pay – an
offer that EMT had refused. Furthermore, a general lien was contrary to the CMR
Convention.

Counsel for EMT argued that the RHA Conditions were incorporated
into the carriage contract and, at the time the lien was exercised, title to the
garments was vested in Bates, EMT’s Customer. Similarly, title to the
air-freight goods in storage for the account of Whisper was vested in Whisper.
It therefore followed that, under both the RHA Conditions of Carriage and the
RHA Conditions of Storage, EMT had a general lien for all the debts of their
customers, Bates and Whisper.

Judgment
The incorporation issue
The judge found, on close examination of the terms of the tripartite contract of
8 September 2005, that, although it could easily have referred to the RHA, in
fact it did not. This was not surprising, the judge said, since the reality was,
as the parties well knew, that each carriage by road contemplated by the
contract was international, to which the CMR would apply. "CMR", he
said, at paragraph 28, leaves little room for the application of the RHA
Rules." Accordingly, he found it "impossible to construe the official
agreement as incorporating the RHA Conditions, nor can they be incorporated by
necessary implication." Had there been no tripartite contract however, the
judge was satisfied that the RHA Conditions had been incorporated into the
carriage contracts between the parties.

The ownership issue
After considering the Control Notes for the Clothing and Fashion Industry issued
by HM Customs and Excise, written evidence on Turkish law and the considerable
oral evidence he had heard, the judge concluded that ownership in the garments
and accessories remained with TCL at all times, and did not in consequence ever
pass to either Whisper or Bates, as Customers of EMT. He concluded, referring to
the oral evidence: "In my judgment, it [the oral evidence] accurately
reflected the custom and practice of the rag trade, here and in Turkey. It also
makes good commercial sense. It would be surprising if TCL (or any other
so-called manufacturer) was willing to surrender title in the goods to a
factory, where it had supplied all the materials and accessories… and was
receiving no payment for them from the factory." He was not impressed by
the fact that the invoices issued by Bates to Whisper in respect of the make-up
charges stated that all garments were sent CIF and that payment was cash against
goods.

Are the RHA Conditions creating General and Particular Liens
consistent with the CMR Convention?
The judge set out the relevant provisions of the CMR (taken from the Schedule to
the Carriage of Goods by Road Act 1965) as follows:

"Chapter III
CONCLUSION AND PERFORMANCE OF THE CONTRACT OF CARRIAGE
Article 6
1. The consignment note shall contain the following particulars:
….
(i) charges relating to the carriage (carriage charges
supplementary charges, customs duties, and other charges incurred from
making of the contract to the time of delivery);

Article 13
1. After arrival of the goods at the place designated for
delivery, the consignee shall be entitled to require the carrier to deliver
to him, against a receipt, the second copy of the consignment note and the
goods. …
2 The consignee who avails himself of the rights granted to
him under paragraph 1 of this article shall pay the charges shown to be due
on the consignment note, but in the event of dispute on this matter the
carrier shall not be required to deliver the goods unless security has been
furnished by the consignee.

Chapter VII
NULLITY OF STIPULATIONS CONTRARY TO THE CONVENTION
Article 41
Subject to the provisions of Article 40, any stipulation
which would directly or indirectly derogate from the Provisions of this
Convention shall be null and void. The nullity of such a stipulation shall
not involve the nullity of the other provisions of the contract."

He noted also that a leading textbook on the CMR Convention –
Professor Malcolm Clarke’s International Carriage of Goods by Road: CMR, 4th
edition – said in relation to Article 13.2, that "subject to this
[Article 13.2] the CMR is silent on rights of retention available to the carrier
and any such rights under national law will remain effective." But the
judge did not find the reasoning in that sentence easy to understand. "It
does not take into account," he said, "Article 41 of CMR. In my
judgment, Article 13.2 of the CMR Convention creates a self-contained Code
whereby the consignee has the right to require delivery of the goods on payment
of the charges shown to be due on the consignment note – coupled with the 1965
Act it creates a statutory lien for the carriage charges. A general lien would
derogate from the consignees’ right of delivery on payment of the charges,
because the consignee could only obtain delivery on payment of additional sums
due in respect of other carriages." He therefore found that a general lien
is null and void under Article 41 of CMR.

By parity of reasoning, he held that, to the extent that the
particular lien granted by the RHA Conditions of Carriage is wider than that
granted by Article 13.1 of CMR, it too is null and void. "The carrier’s
rights are confined to those granted by the Convention".

By this point in the judgment, the judge had concluded that EMT
did not have a general lien for carriage charges because the RHA Conditions of
Carriage had not been incorporated in the tripartite arrangement and, even if
they had been, the garments were not owned by either Bates or Whisper, who were
the Customers of EMT, and a general lien is void under CMR.

Did EMT have a particular lien and, if so, for what?
His reasoning thus far left open the question whether EMT had a
particular lien under CMR for the carriage charges and a particular lien under
the RHA Conditions of Storage for anything else. Article 13.2 of the Convention
gives the carrier a particular lien, enforceable against the consignee, for the
charges shown to be due on the consignment note. But in this case, contrary to
Article 6(1)(i), the box for entry of the carriage charges on the relevant
consignment notes had been left blank.

In the judge’s view, the fact that the charges box had been
left blank was fatal to the carrier’s right to exercise a lien for them.
"Article 13.2," he said, "only allows the carrier to retain the
goods against payment of the carriage charges shown to be due on the consignment
note. This ties in with Article 6(1)(i). The reference to the charges shown
to be due on the consignment note cannot be ignored. The commercial purpose
is to give certainty as to what must be paid to secure release of the goods, at
a time when decisions may have to be made urgently and on the basis of limited
information… If the carrier chooses not to record the carriage charges in the
consignment note, then he will lose the right to exercise a lien."

The judge accepted that it might be rare for consignment notes
to show the carriage charges but that did not, in his view, alter the principle
laid down in the Convention. He also accepted that the exact figure for some
charges, for instance customs duties and some supplementary charges, such as
waiting time, may not be known at the time the consignment note is made out, but
in his view, the consignment note can easily make a general reference to these.
"It is not difficult," he concluded, "for the carrier to ensure
that the consignment note complies with the Convention.

That then left the question whether EMT could exercise the
particular lien under the RHA Conditions for Storage and, if so, for what. The
judge held that, whilst EMT had no right to recover storage charges as such, on
the principle that a person exercises a lien has no right to recover expenses he
incurs in maintaining his security, it did have a right to lien in respect of
certain handling charges that it had incurred in relation to the preparation of
the garments for their on-carriage to the retailer. Furthermore, EMT was
entitled to exercise this particular lien, not only against its Customers, Bates
and Whisper, but also against TCL. TCL must be "treated as having consented
to the goods being bailed to EMT for carriage both ways, and on the usual CMR
terms which include a right of lien against the consignee for the carriage
charges. It also consented to the goods being handled at EMT’s warehouse on
usual terms, which would include RHA Conditions of Storage. It follow from the
general principles established in [he then cites a number of authorities on ‘bailment
on terms’] that, insofar as EMT was entitled as against Bates or Whisper to
exercise a particular lien on the garments, it was also entitled to do so as
against TCL."

TCL was accordingly ordered to pay EMT the modest sum of
£2,626.00, which was itself subject to an offset of £600.00, representing
extra haulage charges occasioned by EMT wrongfully detaining the garments in the
first half of August 2006.

Comment
Whilst the judge’s conclusions in relation to the
incorporation and ownership issues are in themselves unexceptional, given the
particular findings of fact that the judge made, his rulings on the CMR issues
are more controversial.

The requirement to complete the charges box on the consignment
note as a pre-requisite to the exercise of the Article 13.2 lien may – or may
not - be good law but it does not reflect current commercial reality. As the
judge himself recognized, that box is rarely, if ever, completed, for the sound
commercial reason that the carrier does not wish his charges to be generally
known. It is true that a general reference, such as "charges as agreed with
sender" could be inserted in the box,– indeed the judge himself suggested
that this would be sufficient compliance with Article 6(1)(i) of the Convention;
but this would present another administrative requirement for the trade to
fulfill.

More serious still is the judge’s conclusion that any general
lien clause is invalid in the context of a CMR movement, since it impinges upon
the right of the consignee to obtain delivery of the goods at destination. Here
he breaks new ground, since – as the quotation from Professor Clarke’s book
reveals – it has been generally accepted in the trade that additional
conditions are permissible in the CMR context, so long as they do not
specifically clash with a provision of the Convention. Such conditions have
hitherto been regarded as supplementing the Convention, rather than conflicting
with it. If it is indeed the case that a general lien is outlawed for Convention
traffic, this represents a significant worsening of trade terms for the road
carrier, and a matter of concern to his trade association.

It must be noted, however, that this part of the judgment was
not necessary for the judge’s decision in the case and is therefore obiter.
His findings in relation to incorporation and the ownership of the goods were
the key decisions in the case. Furthermore, the editor understands that the
Article 13 points were first raised by the Deputy Judge himself, in the course
of the hearing and were not therefore the subject of extensive oral or written
submissions.

These Case Notes have been prepared
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